It's easy to see how and why unemployment levels have an effect on the housing market and other sectors of the economy. To state the obvious, the people without an income and are not economically independent won't have the money available to buy products and meet monthly bill payments. Those without the available funds are likely to lose their house or not be able to purchase a house in the first place. This adds unoccupied homes to the housing inventory, which will contribute toward a reduction in house prices.

Despite numerous government projects to help stimulate the economy by helping home owners being instigated, a lender is extremely unlikely to negotiate on any loan repayments if the debtor cannot demonstrate how they could afford to pay in the future. This means that foreclosure is extremely likely and a high number of foreclosures are not at all good for the market.

Another, less direct way in which unemployment could have a negative impact on the housing market is through the effect that the unemployed have on the economy. The people without an income have less or no disposable cash to spend, which means that they purchase less from shops and other outlets. This in turn decreases the revenue that's taken by commerce which could result in redundancies or even business closure. This in turn means that there's even less money available on the market for things such as home purchase.

On a more localized level, increased crime rates are witnessed in a certain region having high unemployment levels. Any area with high crime rates is less attractive to prospective buyers and therefore the price of the housing is adjusted downwards to make amends for this lower demand.

Even the people who are employed might not be confident about their future in an economy that is seeing rising unemployment figures. Due to this they might choose to wait until a bad economy stabilizes and improves before making any massive purchases, houses included. Another factor could be that in a negative economy individuals expect house prices to decrease, and thus choose to wait until the market levels out so that they can get the best available price.

Those who do have jobs and a disposable income are more likely to maintain and invest in their houses. Home improvements like re-decorating and building extensions would always have a positive impact on the desirability of a home and nearly always push the price up relative to its location. With fewer individuals making such home improvements, or probably even seeing their houses fall into disrepair because of shortage of funds the overall attractiveness of homes, and therefore the amount that a buyer would be ready to pay for them would drop.

With unemployment levels so closely linked with the housing market, it's usually one thing that is looked at when economists try to forecast housing prospects, and a factor that individuals usually take into consideration before deciding on whether or not to go on with a purchase.